The Truth About the Debt Ceiling

(Austrian) Economics, Taxation, Vulgar Politics
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[I just posted this on Google+, but I figured it was worth posting here as well.]

The debt ceiling is just for show; it hasn’t stopped the federal debt from increasing and politicians just keep raising the ceiling when it’s reached.

Failing to raise the debt ceiling will not necessarily result in default. The federal government has plenty of revenue to cover interest payments, even if it must shift that money out of other parts of the budget. Any claims of immediate default and imminent financial collapse are disingenuous fearmongering designed to fool a gullible and economically ignorant public and force an increase of the debt ceiling and an increase in taxes.

Tax cuts are not the reason for the debt crisis — spending is. Spending in excess of revenue is the cause of any debt, public or private. The federal government has been increasing spending with and without tax cuts for a very long time, under both parties.

The CBO’s inclusion of tax cuts as a major source of current and future federal debt is disingenuous. Why?

  1. Tax cuts are not spending anymore than tax breaks are subsidies (sorry Rachel Maddow).
  2. All of that estimated debt increase can be eliminated by cutting spending without eliminating tax cuts or raising taxes!

The solution is not to eliminate tax cuts and loopholes, let tax cuts expire, or raise taxes. Increasing taxes, however you do it, will inevitably lead to more spending because governments will find something to spend that increased revenue on and then some.

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Mises on the Beach

(Austrian) Economics, The Left, Vulgar Politics
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When Michelle Bachmann confessed to taking the writings of Ludwig von Mises with her on vacation, I assumed she used the august Austrian economist as a soporific — not because Mises isn’t worth reading, or not exciting to read (I can’t tell you how my heart pounded when I first unleashed myself onto The Ultimate Foundation of Economic Science), but because Bachmann has never said anything to suggest a scholarly or subtle mind, the kind of mind best suited for pleasure in reading Mises.

But a Salon writer, Andrew Leonard, has proven himself less dismissive of Bachmann than I. He, knowing nothing of Mises, set out to read Human Action. His conclusion? Well, he didn’t get very far into the book. But he did get far enough to tell us what he found. After reading a few chapters, he was struck by
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A Tale of Two Insights: One Good, the Other Ambiguous

(Austrian) Economics, Libertarian Theory, Statism, The Basics
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In a blogpost titled “Hayek on the Two Orders,” Gene Callahan approvingly quotes the following passage from Hayek and admonishes market advocates not to forget or overlook the important insight within:

If we were to apply the unmodified, uncurbed, rules of the micro-cosmos (i.e., of the small band or troop, or of, say, our families) to the macro-cosmos (our wider civilization), as our instincts and sentimental yearnings often make us wish to do, we would destroy it. Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two sorts of worlds at once. — The Fatal Conceit

All well and good, and familiar to readers of Hayek. But then Callahan follows up with some commentary and things get increasingly murky:

I think this achieves just the right understanding of the balance we ought to seek between market and non-market orders. The market is a wonderful institution, which can achieve marvelous economic efficiency. Economic rationality, on the large scale, is impossible without markets, as Mises and Hayek so wonderfully demonstrated. And yet, markets can easily crush the “more intimate groupings.” Markets, especially at the local level, must be subject to social control, lest that crushing proceeds unchecked. Market advocates should remember both halves of Hayek’s insight!

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Somin on Gary Johnson and Ron Paul: A Reply

(Austrian) Economics, Immigration, Libertarian Theory, Vulgar Politics, War
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Ilya Somin over at The Volokh Conspiracy, it seems, is no more a fan of Ron Paul now than he was four years ago. His criticisms remain about the same. This time around, though, he’s got a candidate to contrast Paul with in Gary Johnson. His conclusion? Johnson is a better libertarian than Paul. My first response to this was laughter. This is my second response:

To start, Somin nearly lost me in his first sentence when he suggested that Indiana Governor Mitch Daniels was even on the radar for libertarians considering voting. If anyone thinks a hypocritical drug warrior, who might be most charitably described as untested on foreign policy issues (and much less charitably described as a propagandist for the Empire), should even be in the running, then they should probably be disqualified from commenting on the question of who the most libertarian candidate is. All that said, we’ll give him the benefit of his doubts about Daniels for now and move onto his criticisms.

Ron Paul’s Unlibertarian Positions?

Somin claims that Ron Paul “has very nonlibertarian positions on free trade, school choice, and especially immigration.” He goes on to criticize Paul’s views on the Fourteenth Amendment. He doesn’t spell these criticisms out in this piece, but rather directs us to an older article from 2007. We’ll take each one by one.

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